"Youth is easily deceived
because it is quick to hope."
—Aristotle (Greek, 384-322BC)
Word for the day
Penitent (adj)
Feeling or expressing sorrow
for sin or wrongdoing and disposed to atonement and amendment; repentant;
contrite
(Source: Dictionary.com)
Malice towards
none
Well done Mr. Fadnavis!
Now please also tell us
whatever the previous government did to suppress the freedom of expression and
appease religious minorities was right and you see nothing wrong in continuing
with those practices.
Sitting tight and liquid, and praying
Past few months have been tough on both investors and investment
experts. The rise in uncertainty and consequent rise in volatility in asset
prices and returns has made the task of asset allocation tougher. Traders
appear even more exasperated.
Under the circumstances you cannot find fault with me, if I pray,
totally with selfish motive and all my sincerity — "May RBI governor
please (a) not effect any change in the monetary policy stance and key rates;
and (b) make a strong commentary on the inadequacy of government's efforts in
reviving economic growth and preparing for a potential 2008-09 like global
contagion."
This coming on the back of a spate of growth downgrades and global
risk-off trade, may lead to material correction in Indian equity and bond
prices. The assets which are quoting at "middle of the channel
prices" may correct sharply to the lower bound of the channel and provide
an entry point where I do not have jostle with too many other buyers.
I firmly believe that:
(a) We have already entered
the phase of low inflation and lower growth. With most extant drivers of growth
(US, EU, China, Commodity producers) throttled by sluggish demand and excessive
debt, it is highly unlikely that we may see any meaningful recovery in wages
and industrial commodities, energy & food prices for next few years.
This phase may last at least for next 3years. The interest rates
in India are definitely not rising from the current levels in this period. They
may in fact be cut materially once the liquidity conditions improve.
Given the relatively strong macro fundamentals, the
government of India securities (Gilts) therefore would make an attractive low
risk investment.
My simple calculation suggests if I can get an entry when
benchmark 10yr trades at 7.9% yield, I may be able to get ~9% CAGR for next
3yrs, assuming the benchmark yields correct by 65-70bps over this period.
Not at all bad when the nominal growth is expected to be close to
10%.
(b) The convergence of
equity yields and bond yields has historically led to beginning of most bull
markets in Indian equities.
A sharp correction in equity prices, alongside bond price
correction courtesy Governor Rajan and Chairperson Yellen will also provide a
hassle free entry point in Indian equities.
As indicated this Monday (see
here) the market internals are weakening with each passing day. In past two
days, the cracks in Nifty have widened further.
I do not know what would be the immediate trigger, but ~7K on
Nifty appears quite plausible from here.
In the meanwhile, I am sitting tight and liquid.
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